Review...

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Review...

• Tuesday, August 18

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QUESTION 1 (aggregate demand)
Suppose that, in some market, there are 5
potential buyers, each with the same marginal
benefit function, MBi 6 Q, and there are 5
potential sellers, each with the same marginal
cost function, MCi 2 Q. Which of the
following gives the correct market demand
function (the combined demand of all 5 buyers)?
A) QD 90 7P B) QD 10 P C) QD 30 5P
D) QD 40 4P E) QD 20 8P
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answer to question 1
Suppose that, in some market, there are 5
potential buyers, each with the same marginal
benefit function, MBi 6 Q, and there are 5
potential sellers, each with the same marginal
cost function, MCi 2 Q. Which of the
following gives the correct market demand
function (the combined demand of all 5 buyers)?
A) QD 90 7P B) QD 10 P C) QD 30 5P
D) QD 40 4P E) QD 20 8P
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QUESTION 2 (aggregate supply)
Suppose that, in some market, there are 5
potential buyers, each with the same marginal
benefit function, MBi 6 Q, and there are 5
potential sellers, each with the same marginal
cost function, MCi 2 Q. Which of the
following gives the correct market supply
function (the combined demand of all 5 sellers)?
A) QS 4P 10 B) QS 3P 2 C) QS 5P Q
D) QS 5P 10 E) QS 4P 10
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answer to question 2
Suppose that, in some market, there are 5
potential buyers, each with the same marginal
benefit function, MBi 6 Q, and there are 5
potential sellers, each with the same marginal
cost function, MCi 2 Q. Which of the
following gives the correct market supply
function (the combined demand of all 5 sellers)?
A) QS 4P 10 B) QS 3P 2 C) QS 5P Q
D) QS 5P 10 E) QS 4P 10
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QUESTION 3 (equilibrium price)
5 buyers, each with MBi 6 Q5 sellers, each
with MCi 2 Q QD 30 5PQS 5P 10 What
is the price of the good in market equilibrium?
A) 4B) 3 C) 5 D) 7E) 1
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answer to question 3
5 buyers, each with MBi 6 Q5 sellers, each
with MCi 2 Q QD 30 5PQS 5P 10 P 4
A) 4B) 3 C) 5 D) 7E) 1
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QUESTION 4 (consumer surplus)
5 buyers, each with MBi 6 Q5 sellers, each
with MCi 2 Q QD 30 5PQS 5P 10 When
P 4, how muchsurplus does each consumer get?
A) 1B) 3 C) 4 D) 5E) 2
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answer to question 4
5 buyers, each with MBi 6 Q5 sellers, each
with MCi 2 Q QD 30 5PQS 5P 10 CSi
(.5)(2)(2) 2
A) 1B) 3 C) 4 D) 5E) 2
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QUESTION 5 (consumer surplus)
5 buyers, each with MBi 6 Q5 sellers, each
with MCi 2 Q QD 30 5PQS 5P 10 When
P 4, how totalconsumer surplusis there?
A) 9B) 18 C) 14 D) 10E) 12
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answer to question 5
5 buyers, each with MBi 6 Q5 sellers, each
with MCi 2 Q QD 30 5PQS 5P 10 CS
(.5)(10)(2) 10
A) 9B) 18 C) 14 D) 10E) 12
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QUESTION 6 (cost-benefit analysis)
Building a skate park in a currently empty area
will cost 5000 in construction and such. There
are 14 skaters in the neighborhood, and each one
would be willing to pay a maximum of 500 to have
the skate park built. A private developer is
willing to pay X for the land. (This is the only
other offer around.) So, the skate park should be
built as long as... A) X is equal to 5000B) X is
greater than 5000C) X is less than 5000 D) X is
greater than 2000E) X is less than 2000
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answer to question 6
Building a skate park in a currently empty area
will cost 5000 in construction and such. There
are 14 skaters in the neighborhood, and each one
would be willing to pay a maximum of 500 to have
the skate park built. A private developer is
willing to pay X for the land. (This is the only
other offer around.) So, the skate park should be
built as long as... A) X is equal to 5000B) X is
greater than 5000C) X is less than 5000 D) X is
greater than 2000E) X is less than 2000
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QUESTION 7 (quantity demanded, continuous)
MB 60 2Q If P 10, what is the quantity
demanded? A) 25 B) 30 C) 40 D) 50 E) 60
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answer to question 7
MB 60 2Q If P 10, what is the quantity
demanded? 60 2Q 10 2Q 50 Q 25 A) 25 B)
30 C) 40 D) 50 E) 60
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QUESTION 8 (demand curve, continuous)
MB 60 2Q Which gives the correct equation for
the demand curve? A) Q 30 P/2 B) Q 60
P/2 C) Q P/2 60 D) Q P/2 30 E) Q 60
P/2
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answer to question 8
MB 60 2Q Which gives the correct equation for
the demand curve? A) Q 30 P/2 B) Q 60
P/2 C) Q P/2 60 D) Q P/2 30 E) Q 60
P/2
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QUESTION 9 (consumer surplus, continuous)
MB 60 2Q If the price is 10, then how much
consumer surplus is there? A) 60 B) 625 C)
900 D) 1250 E) 1800
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answer to question 9
MB 60 2Q If the price is 10, then how much
consumer surplus is there? A) 60 B) 625 C)
900 D) 1250 E) 1800
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QUESTION 10 (consumer surplus, continuous)
MB 90 3Q If the price is 30, then how much
consumer surplus is there? A) 2700 B) 600 C)
3600 D) 1200 E) 1350
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answer to question 10
MB 90 3Q If the price is 30, then how much
consumer surplus is there? A) 2700 B) 600 C)
3600 D) 1200 E) 1350
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QUESTION 11 (continuous supply)
Suppose that my firm produces some good with the
total cost function TC 40Q .25Q2, and the
marginal cost function MC 40 .5Q. If the
price of the good I sell is 70, then how many
units will I choose to sell?
A) 40 B) 60 C) 70 D) 80
E) 50
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answer to question 11
Suppose that my firm produces some good with the
total cost function TC 40Q .25Q2, and the
marginal cost function MC 40 .5Q. If the
price of the good I sell is 70, then how many
units will I choose to sell? 40 .5Q 70.5Q
30Q 60
A) 40 B) 60 C) 70 D) 80
E) 50
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QUESTION 12 (producer surplus)
TC 40Q .25Q2 MC 40 .5Q If the price of
the good I sell is 70, and I sell 60 units of
the good, then how much producer surplus will I
get?
A) 400 B) 600 C) 1000 D) 900
E) 800
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answer to question 12
TC 40Q .25Q2 MC 40 .5Q If the price of
the good I sell is 70, and I sell 60 units of
the good, then how much producer surplus will I
get? (.5)(60)(30) 900
A) 400 B) 600 C) 1000 D) 900
E) 800
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QUESTION 13 (adding demand functions)
Suppose that there are two potential buyers of a
certain good Alice and Bill. Their marginal
benefit functions for the good are given
below MBA 20 2Q MBB 10 .5Q If the price
of the good is 4, what is the total quantity
demanded?
A) 8 B) 20 C) 12 D) 4 E)
16
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answer to question 13
Suppose that there are two potential buyers of a
certain good Alice and Bill. Their marginal
benefit functions for the good are given
below MBA 20 2Q MBB 10 .5Q If the price
of the good is 4, what is the total quantity
demanded? 20 2QA P 10 .5QB P 2QA 20
P .5QB 10 P QA 10 P/2 QB 20
2P QA(4) 8 QB(4) 12Q(4) 20
A) 8 B) 20 C) 12 D) 4 E)
16
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QUESTION 14 (adding demand functions)
Suppose that there are two potential buyers of a
certain good Alice and Bill. Their marginal
benefit functions for the good are given
below MBA 20 2Q MBB 10 .5Q If the price
of the good is 12, what is the total quantity
demanded?
A) 4 B) 8 C) 1 D) 2 E) 6
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answer to question 14
Suppose that there are two potential buyers of a
certain good Alice and Bill. Their marginal
benefit functions for the good are given
below MBA 20 2Q MBB 10 .5Q If the price
of the good is 12, what is the total quantity
demanded? 20 2QA P 10 .5QB P 2QA 20
P .5QB 10 P QA 10 P/2 QB 20
2P QA(12) 4 QB(12) -4?? no, 0Q(12) 4
A) 4 B) 8 C) 1 D) 2 E) 6
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(page borrowed from chapter 5 lecture)

We usually assume that people cant consume
negative quantities of a good...
When buyers exit the market at different prices,
there can be kinks in the graph.
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QUESTION 15 (absolute advantage)
Brandon and Dylan are roommates, and they both
like to eat some combination of tacos and
burritos.
A) Brandon has an absolute advantage in tacos
Dylan has an absolute advantage in burritos. B)
Dylan has an absolute advantage in tacos Brandon
has an absolute advantage in burritos C) Brandon
has an absolute advantage in tacos and
burritos D) Dylan has an absolute advantage in
tacos and burritos.
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answer to question 15
Brandon and Dylan are roommates, and they both
like to eat some combination of tacos and
burritos.
A) Brandon has an absolute advantage in tacos
Dylan has an absolute advantage in burritos. B)
Dylan has an absolute advantage in tacos Brandon
has an absolute advantage in burritos C) Brandon
has an absolute advantage in tacos and
burritos D) Dylan has an absolute advantage in
tacos and burritos.
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QUESTION 16 (comparative advantage)
A) Brandon has a comparative advantage in tacos
Dylan has a comparative advantage in burritos. B)
Dylan has a comparative advantage in tacos
Brandon has a comparative advantage in
burritos C) Brandon has a comparative advantage
in tacos and burritos D) Dylan has a comparative
advantage in tacos and burritos.
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answer to question 16
A) Brandon has a comparative advantage in tacos
Dylan has a comparative advantage in burritos. B)
Dylan has a comparative advantage in tacos
Brandon has a comparative advantage in
burritos C) Brandon has a comparative advantage
in tacos and burritos D) Dylan has a comparative
advantage in tacos and burritos.
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QUESTION 17 (market equilibrium)
MB 17 4Q MC 5 2Q What is the market
equilibrium price? A) 2 B) 9 C) 4 D) 17 E) 5
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answer to question 17
MB 17 4Q MC 5 2Q What is the market
equilibrium price? A) 2 B) 9 C) 4 D) 17 E) 5
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answer to question 17, continued
MB 17 4Q MC 5 2Q 17 4Q 5 2Q 6Q
12 Q 2 MB 17 4(2) 9 MC 5 2(2) 9
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QUESTION 18 (price elasticity of demand)
The demand curve has the equationQ 200
10P What is the price elasticity of demand when
the price is 5? A) 0 B) 2 C) 3 D)
1/2 E) 1/3
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answer to question 18
The demand curve has the equationQ 200
10P What is the price elasticity of demand when
the price is 5? A) 0 B) 2 C) 3 D)
1/2 E) 1/3
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QUESTION 19 (price elasticity of demand)
The demand curve has the equationQ 10 P What
is the price elasticity of demand when the price
is 3? A) 3/4 B) 2/19 C) 3/7 D)
12/5 E) 1
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answer to question 19
The demand curve has the equationQ 10 P What
is the price elasticity of demand when the price
is 3? A) 3/4 B) 2/19 C) 3/7 D)
12/5 E) 1
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QUESTION 20 (price elasticity of supply)
The supply curve has the equationQ 10
P What is the price elasticity of supply when the
price is 50? A) 2/3 B) 3/14 C) 8/9 D)
12/7 E) 5/4
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answer to question 20
The supply curve has the equationQ 10
P What is the price elasticity of supply when the
price is 50? A) 2/3 B) 3/14 C) 8/9 D)
12/7 E) 5/4
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QUESTION 21 (shifts in supply and demand)
Suppose that people enjoy bowling more when they
are drinking a lot of beer. If the government
imposes a large tax on beer, what would most
likely happen to the price and quantity of
bowling alley rentals? A) higher price, higher
quantity B) higher price, lower quantity C) lower
price, higher quantity D) lower price, lower
quantity
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answer to question 21
Suppose that people enjoy bowling more when they
are drinking a lot of beer. If the government
imposes a large tax on beer, what would most
likely happen to the price and quantity of
bowling alley rentals? A) higher price, higher
quantity B) higher price, lower quantity C) lower
price, higher quantity D) lower price, lower
quantity
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QUESTION 22 (shifts in supply and demand)
Suppose that leather becomes more expensive. What
would be most likely happen to the price and
quantity of leather shoes? A) higher price,
higher quantity B) higher price, lower
quantity C) lower price, higher quantity D) lower
price, lower quantity
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answer to question 22
Suppose that leather becomes more expensive. What
would be most likely happen to the price and
quantity of leather shoes? A) higher price,
higher quantity B) higher price, lower
quantity C) lower price, higher quantity D) lower
price, lower quantity